Productive Structure and Procyclical Productivity

Zoubir Benhamouche

Annals of Economics and Statistics, 2002, issue 65, 153-171

Abstract: This paper considers the role of an input-output structure in propagating demand shocks. We build a model based on Basu [1995], where firms face menu costs. We show that taking into account an "in chain" productive structure allows to give a quantitative importance to the mechanism of factors reallocation giving rise to the procyclicality of total factor productivity in Basu [1995]. More precisely, to explain 20% of the procyclicality of TFP, Basu [1995] needs a markup around 60%, which is not supported by data. Here, we can have significant quantitative results with a moderate markup from 15% to 30%.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2002:i:65:p:153-171

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